Unit 4 apec

I. Pre-Reading Task

1. When was APEC created?

2. What countries are APEC members?

3. What are APEC’s goals?

4. How does it work?

5. Does APEC have much leverage in the region?

II. Reading Task

1. Read the text to find out the answers to the following questions

1. What is one of the main directions of Russian foreign policy?

2. How can Russia’s entry into APEC be seen from the political point of view?

3. According to APEC’s supporters, what is necessary to build an effective open global trading system?

4. Is Russia’s entry into APEC a political or economic event?

5. What is the purpose of a “road map” that Russia needs to develop?

6. What benefits can Russia gain from participation in APEC?

7. What are the argument against the expectation of benefits from Russian membership in APEC?

Russia’s foreign policy for nearly a decade has been to seek greater integration into the world economy, and as part of this objective it has sought to join all existing forms of regional cooperation in Asia and the Pacific. Its application for membership in APEC was first made in 1995, and the decision at the Vancouver Summit in 1997 to admit Russia as one of three new members, effective with the November 1998 meetings in Kuala Lumpur, represented a major achievement for Russian policy. The decision can be seen as a political recognition of Russia’s desire to play a new and more active role in the region and an important step in changing that role to one of partnership with other APEC member economies. The question now is: What will this step mean for Russia? and what will it mean for the Asia-Pacific region and the rest of the world? APEC’s supporters argue that an open global trading system can best achieved by pursuing, in a complementary manner, both global liberalization efforts consistent with WTO rules and liberalization in a regional or sub-regional context, provided the latter are designed to make a positive contribution to global liberalization. What could be the Russian role in these two parallel processes, and can the case be developed for further liberalization by Russia under current economic conditions?

From Russia’s perspective, much of the case for APEC membership is based upon the economic aspirations of the Russian Far East, which views itself as an emerging Pacific Russia, and looks instinctively to its neighbours on the Asia-Pacific Rim for closer economic and other relations, in many ways more than to far-distant European Russia, 9,000 kilometres away. What are the characteristics of the economy of Pacific Russia, including neighbouring Eastern Siberia, and what are the issues in seeking greater integration with the Asia-Pacific region?

More broadly, how can best advantage be taken of Russia’s membership in APEC, and what types of analysis are needed to inform such decisions?

Russia’s Entry into APEC:

A Political or Economic Event?

Membership in APEC is a key component of Russia’s new foreign policy in Asia and the Pacific. As a part of this policy, Russia has wanted to join every available forum for integration or cooperation within the Asia-Pacific region, whether economic, political or security-related. The objectives have been a more secure external environment to allow Russia to concentrate on internal national issues, a strengthening of bilateral and multilateral relationships with an economically dynamic region, and the development of a more sophisticated approach for attracting foreign investment to the Russian Far East and Siberia. In addition to APEC membership, Russia currently has on the table its soundings on the possibility of joining the Asian Development Bank, although there are a number of considerations that seem likely to postpone action on the latter.

In many ways, the decision to seek entry into APEC was essentially a political one, without any particularly detailed assessment of prospective benefits or how best to take advantage of APEC membership. The acceptance of Russia’s bid for membership by other APEC members, including the important factor of Japanese support, should also be seen as largely political, since there were factors which could have argued that more effective or earlier results in APEC might have been achieved without enlarging the membership group and that Russia did not necessarily meet some of the membership criteria. In the case of Japan, an important view seems to have been that there was a global need to engage Russia more actively in the international economic system. At least some of APEC’s leaders saw accepting Russia into the APEC community as a means of supporting Russia in its economic reforms and its move to a more open economy, and of increasing security through greater interaction and increasing trade.

Russia’s acceptance as a member at the Vancouver meetings in 1997 can be seen as an important achievement of Russian diplomacy in pursuing its new foreign policy, but it also reflects the willingness of APEC leaders to support Russia in its search for a national development path and a new role in the international economy..

APEC is, however, essentially a trade and economic forum, even if it represents a process of seeking political cohesion and consensus as the path to decision-making. What Russia’s participation in APEC can bring to Russia, as well as its impact on the objectives of other members, depends on how Russia plays its new role and how it orients itself as a participant and makes use of its place in the complex process that APEC represents.

Among the arguments of some observers on the case against Russian membership -- which may cast some light on issues related to Russia’s role -- were that prospective benefits for Russia might be far distant, that it could represent a threat to Russian control of its sparsely populated Far East to open up the region to more successful neighbours, that Russia was not yet a significant economic player in Asia, that government in Russia and, in particular, the investment environment, left much to be desired, and that APEC’s achievements to date were less than spectacular.

Despite such arguments, however, Russia has a seat at the table, and to gain useful benefits Russia needs to develop a "road map" to guide its way, at least initially, in applying limited resources to a complex and challenging array of committees, working groups, projects and other activities.

Participants in the APEC process from other countries who were interviewed for the present project have emphasized the need to establish priorities for participation and the use of available resources if the early years of membership (for any country) are to yield useful results. Committee and working group chairpersons and other participants have also emphasized the need for key national participants on any APEC committee or working group to devote a considerable portion of their time to the work involved. This implies the need for a careful analysis of Russian interests and of where and how benefits may most readily be obtained, and a high degree of selectivity in the allocation of core resources. Such an analysis, even if accepted as necessary, represents a significant challenge for the small number of over-stretched Russian officials dealing with international economic issues.

Russia’s Goals and the Prospective Benefits

Russia is a Pacific country, and its Far East region occupies a third of the country’s total territory and looks to the Asia-Pacific region as its natural neighbours and economic partners. Russian participation in regional institutions to date, however, has been limited, and APEC clearly provides a very important beginning if Russia is to develop and apply a multipolar view of international economic relations. What are the components, both short and longer-term, of what Russia may be able to gain from participation in APEC? Are there also costs or potential disbenefits?

There are clearly arguments for and against the expectation of benefits for Russia. From a Russian policy perspective, the arguments for expecting significant benefits are several:

• First of all, participation in APEC can demonstrate Russia’s commitment to more effective integration into the world economy and show that it is prepared to work with the liberalizing objectives of APEC and the kind of market principles that are assumed in the APEC relationship.

• Participation in the range of APEC fora, including committees and working groups, can help Russian participants -- who should include regional as well as central government officials and members of the business community -- to better understand market mechanisms as they operate in other countries in the region, as well as the factors underlying development in particular sectors. Russian technical pre-eminence in some fields may also contribute to both the work of APEC sector groups and to development of bilateral and business linkages that can lead to increased trade and investment.

• Such participation and the personal associations that result can help to broaden the understanding in Russia, including the Russian Far East, of the factors that determine trade and foreign investment decisions in other member economies, a consideration that may be particularly important at policy and administrative levels.

• There should be related, perhaps significant, benefits from the training and capacity-building activities undertaken by various working groups as part of APEC’s broad "EcoTech" agenda.

• Russian participation at the table in consultations that include the leaders of major Asia-Pacific countries can be used to promote bilateral relations with individual countries which otherwise could take much more time and effort.

• Such consultations can help in understanding regional and national problems and interests, which in turn can help Russia to develop its policy and strategy on bilateral and international economic issues. This includes strategies for dealing with global economic problems, such as the financial crisis in 1998.

• The participation of business representatives, in both the high-level ABAC and the various APEC working groups where business representatives of other countries play a role, can be potentially valuable in terms of networking for Russia’s emerging business community and in helping this important group to better understand business decisions as they are made elsewhere.

• The whole area of Early Voluntary Sectoral Liberalization or EVSL and other aspects of trade liberalization and trade facilitation may provide very useful experience for Russian participants in preparing for membership in WTO, without some of the constraints involved in multilateral negotiations in the WTO context. In this sense, APEC has been described by some observers as a potential "locomotive" for making progress in WTO.

• A more political consideration offered by United States officials in particular is that Russia, with its important Pacific coastline, is a natural participant in APEC, even if the size of Russia’s economic participation in the region is still limited, and that APEC membership can help Russia’s political role and influence to be used in a positive way.

• At a very practical level, a considerable number of APEC reports and other documents reflect the objective of transparency on policy and administrative measures affecting trade and investment. These include the Individual Action Plans prepared by each member, which are expected to provide a comprehensive review of such policies as well as identify the steps each country plans to take towards APEC trade liberalization and facilitation objectives, and the Investment Guide, which provides a comprehensive statement of measures affecting investment.

Such documents not only provide an unequalled source of authoritative information on policies and administrative measures that will be of value to Russian corporations considering business commitments in other countries, but will provide what is likely to be the most important single source of such information for foreign investors who may be willing to consider commitments in the Russian market, whether in the Russian Far East or elsewhere.

On the other side, various arguments against the expectation of benefits from Russian membership in APEC have been suggested by some observers.

• It has been argued that Russia’s participation in trade, investment and economic cooperation in Asia-Pacific is far too limited to be of real interest to its APEC partners, and that it may not be taken seriously by other participants.

• It has also been argued that Russia may not gain as much from the trade liberalization process in APEC as it would from concentrating its limited resources on accession to WTO.

• APEC participation will make considerable demands on the limited time and energy of Russian officials. Some of the same benefits might be obtained bilaterally, and if APEC members open their markets, these could become more accessible for Russia without the burden of APEC participation.

• Russian membership, in any case, may be unlikely to contribute much to trade liberalization in the short term.

• APEC is a consensus-based process. Because Russia begins from a different starting point, its participation may well make progress in APEC slower and more difficult.

• Japan, although it supported Russia’s entry into APEC, may not be willing to provide much further support until progress is made on the bilateral territorial issue.

• The major issue underlying the current economic difficulties in Russia lies in the weakness of financial and economic management, and this is sufficiently fundamental that it needs to be addressed before other issues.

• "Open regionalism" as a central principle may have dangers for Russia if it accepts the move toward free trade in the APEC context, since it may need to make concessions that could weaken its position with more important trading partners in Europe.

• APEC may not be an effective mechanism for dealing with the global financial crisis, and its value may be reduced accordingly.

Nevertheless, Russian membership in APEC has been achieved. The issue, as already noted, is How can Russia best take advantage of its membership, and how will other members respond to Russia’s presence and participation?

2. Look through the text again and pick out the key words and expressions

III. Post-Reading Tasks

1. Discussion.

1. Does Russia’a aspiration to participate in APEC pose a threat to its economic development?

2. Is the Russian Far East an ‘underdeveloped’ region?

3. From out of the arguments a) for; b) against expecting benefits from Russian membership in APEC choose the three which you consider most important and rank them in order of importance.

2. Simulations

Divide into 2 groups:

Group 1: You think that Russia’s entry into APEC is beneficial for Russia.

Group 2: Your opinion is that Russia’s entry into APEC is not beneficial for Russia.

Hold a meeting and discuss the advantages and disadvantages of Russia’s membership in APEC.

3. Make a summary of the text